Reasons Why Crypto Market Has Plummeted
The world of digital assets is uncertain – the cryptocurrency market is volatile and hitting a new low daily. It had slid down to $870 billion a few months back. FTX, one of the major cryptocurrency exchanges seeing massive growth, failed in November 2022. This development caused cryptocurrency prices to become volatile. Eventually, on December 3, 2022, the price of Bitcoin (BTC) reached a new annual low of $16,736.
Cryptocurrency investors had a rough last year, with the value of Bitcoin and other virtual currencies sinking drastically. This sudden fall has affected several cryptocurrency investors. If you, too, have been hit hard by the crypto storm, it’s time to learn the reasons behind its downfall.
Let’s discuss in detail the reasons why the crypto market has plummeted.
1. COVID-19 Uncertainty
Ever since the Covid-19 pandemic’s new variant named the Omicron, investors have been hesitant to invest in cryptocurrency due to the wide spread of the virus.
2. Russia & Ukraine War
When Russia announced the war against Ukraine, the cryptocurrency market crashed drastically. It resulted in the investor community selling them off for fear of further price reduction.
3. Hike in Interest Rates
When the US Federal Reserve announced a hike in interest rates that further led to a downfall in the market, participants were now even more pressurized.
4. The Fall of Terra
After the collapse of the algorithm stablecoin, Terra shrunk, failing its peg with the US dollar. Similarly, the price of LUNA fell, and most crypto holders lost their money. It was the beginning of the downfall of cryptocurrency.
5. Downhill Equity Market
The crypto market has a high correlation with the equity markets. So, the crypto market goes down when the stock market is down. Until mid-2022, crypto prices rose and fell in line with equity prices. However, with a constant drip in tech stocks, the crypto market declined globally as Bitcoin, Ethereum and Dogecoin were heavily affected.
Since US inflation reached a 40-year high, Bitcoin has reached its 18-month low. Besides the collapse of the Terra/Luna ecosystem, many companies have faced troublesome events.
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